Asia Markets recap: regional stocks and other news

January 16, 2014, 6:54 PM ET

Reuters

Welcome to the Asia Markets live blog! We’ll be offering readers a running account of what the region’s stock markets and other asset classes are doing, as well as what it means for the global financial picture.

As Australia suffers from record summer heat, the stock market in Sydney is wilting. It’s nothing huge — the S&P/ASX 200 is currently down 0.3% — but if you’re long Aussie equities and looking for who’s at fault, don’t blame the weather, blame Citigroup.

Yes, it seems that despite lacking an Australian listing, Citi is having an outsized impact today on the Lucky Country’s shares. On the one hand, the major banks are trading lower after Citi’s almost doubling of fourth-quarter profit still fell short of what analysts were expecting.

On the upside, Citi was also there. The bank changed its 12-month stance on the global mining sector to bullish from neutral, its first such bullish call in three years, and this lifted BHP and Rio Tinto shares in London, finishing higher by 3.8% and 2.5%, respectively. This, in turn, boosted the Australian listings, with BHP currently up 2.5% and Rio ahead by 1.7%.

Another blah day in Tokyo. The Nikkei Average is currently down 0.4%, just as it closed 0.4% yesterday. (The broader Topix is flat though, so it’s the blue chips that are the likely weak spot.)

That said, it’s not so bleary for everyone. Take Mitsubishi Motors, for example. Its shares are zooming up 9%, building on their 8.3% leap in the previous session, after the company reportedly said sales in China more than doubled in December.

Among the issues weighing on Chinese banks today is a Reuters report saying that Industrial & Commercial Bank of China (the country’s largest lender, better known as ICBC) has refused to bail out an investment trust product it sold. We’ll know for sure what happens on Jan. 31 when the product matures (coincidentally on the first day of Chinese New Year), but it looks like a default is a distinct possibility.

The trust in question is reportedly worth 3 billion yuan ($500 million) and consists of debt to Zhenfu Energy Group, a struggling coal miner in Shanxi (China’s coal country, sort of a Chinese West Virginia, if you will).

A Barclays note out this morning says China’s financial regulators could do worse than letting the trust go to default. For one thing, it jibes with Beijing’s stated goal of reforming the nation’s financial markets. Also, “the default of trust products could have less social impact than the default of wealth-management products, bonds and other products sold to the general public or have problematic practices, such as asset-pool investments.”

And how will it all shake out if ICBC and China’s government let the trust go bust?

Barclays write: “We believe the default of trust products could trigger some short-term negative impact to China’s financial sector and the reputation of financial institutions. However, we believe it would be positive for the healthy development of financial system in the long run.”

The hottest stock in Shanghai today is an obscure industrial-valve producer called Neway Valve.

Ah, but this is not just any valve maker — it’s also the first IPO to debut on mainland China’s top market in over a year, now that regulators are allowing new listings again. The shares shot up more than 30%, triggering circuit-breakers that imposed a half-hour trading halt.

Wild speculation, you say? Perhaps — The Wall Street Journal quotes one analyst as saying that “Neway’s earnings growth is unlikely to be brilliant as the country shifts away from an investment-driven economic growth model.”

While Facebook is said to be struggling with declining traffic among U.S. teens, China’s most popular social-media channel — a group of Twitter-like microblog services, known collectively as “weibo” — is facing its own problem, bleeding users moving to instant-messaging apps on mobile phone platforms.

After ending the morning session down 0.7%, the Nikkei Average staged one of its not-uncommon afternoon comebacks, breaching into positive territory at one point before ending down 0.1% for the day. This, as the yen moved more or less sideways.

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